Financial Statements

Why do businesses need Financial Statements?

Financial statements are an critical part of good business practice. Keeping good books and good accounting procedures translates seamlessly into reliable financial statements and tax returns.  This is the foundation upon which to build a prosperous business.

If you want your business to grow they will be required by third parties including: bonding companies, banks, government agencies, and investors.

If we prepare your business tax return and have enough information we can typically provide you with a financial statement.

Compilation – Lowest Level of Assurance

Compilation services are offered to assist your accounting department in the preparation of your financial statements in accordance with professional standards. A compilation involves obtaining information from management in an effort to prepare financial statements without expressing any assurance that the statements are fairly presented or about the underlying information in the statements.

The objective of a compilation of financial statements is to assist management in presenting financial information in the form of financial statements without providing any assurance that there are no material modifications that should be made to the financial statements.

We improve the quality of the compiled financial information by helping clients present it in accordance with GAAP, an other comprehensive basis of accounting (OCBOA), or other applicable reporting framework. Although our report does not explicitly provide assurance, the fact we assisted helps provide assurance to decision makers.

The compilation, by formatting information in a standard format, allows you to evaluate your company’s performance and allows us to highlight and recommend ways to enhance your organization’s operations.

Compiled financial statements represent the most basic level of service CPAs provide with respect to financial statements.

In a compilation engagement, the accountant assists management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements.

In a compilation, the CPA must comply with Statements on Standards for Accounting and Review Services (SSARSs) which requires the accountant to have an understanding of the industry in which the client operates, obtain knowledge about the client, and read the financial statements and consider whether such financial statements appear appropriate in form and free from obvious material errors.

A compilation does not contemplate performing inquiry, analytical procedures, or other procedures ordinarily performed in a review; or obtaining an understanding of the entity’s internal control; assessing fraud risk; or testing of accounting records; or other procedures ordinarily performed in an audit.

The CPA issues a report stating the compilation was performed in accordance with Statements on Standards for Accounting and Review Services; and that the accountant has not audited or reviewed the financial statements and accordingly does not express an opinion or provide any assurance about whether the financial statements are in accordance with the applicable financial reporting framework.

In compiling financial statements for a client, we present information that is the “representation of management” and expresses no opinion or assurance on the statements. Compilations don’t require inquiries of management or analytical procedures. Instead, we rely on our knowledge of accounting principles and a general understanding of your business.

 

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